- Asos shares plunge 19%
- The company issues a profit warning
- Asos has been impacted by a change in consumer behaviour
Asos shares plunged 19% in early trading Thursday after the company released a trading update warning of inflationary pressures impacting consumer shopping habits 😬.
While Asos said since the end of February, it has experienced “accelerating sales” driven by its operational performance and increased demand due to events, its performance has been blighted by a significant increase in returns rates in the UK and Europe towards the end of May…ouch.
Those return rates, according to Asos, reflect inflationary pressures on consumers, “which has a disproportionate impact on profitability.”
Total group revenue for the three months ended May 31 came in at £983.4 million, below the £987.9 million reported during the same period last year.
“What is now clear, based on the significant increase in returns rates that we have seen, is that this inflationary pressure is increasingly impacting our customers shopping behaviour. It is too early to tell for how long the current pattern of customer behaviour will continue but we are taking swift and decisive steps to minimise the impacts whilst continuing to deliver against the strategic initiatives we laid out in November that will ensure that ASOS builds for the long-term,” said Asos COO Matt Dunn.
As a result of the high return rate, the online fashion retailer now expects adjusted pre-tax profit between £20 million and £60 million, significantly below its previous guidance of £110 million to £140 million.
Asos’ latest warning follows last year’s caution, which resulted in the departure of former chief executive Nick Beighton.
However, the company has now appointed José Antonio Ramos Calamonte as Chief Executive Officer and Jørgen Lindemann as Chair.
Asos’ dip has come as no surpirse. We pointed out at the end of May that consumer mentions of the company on Twitter had declined over the last month.
Meanwhile, SemRush web data showed a decline in traffic this year.